The World Bank

Presented by:Elena Pak

Matt GompersECON 490

Organization• The President:

– Robert B. Zoellick, effective July 1, 2007.– President serves a 5-year term, at the pleasure of executive directors. – Has many titles, including

1. Chairman of the Board of Directors of the International Development Association

2. Chairman of the Board of Directors of the International Finance Corporation

3. Chairman of the Administrative Council of the International Centre for the Settlements of Investment Disputes

4. Chairman of the Board of Directors of the Multilateral Investment Guarantee Agency

– Executive Directors select a President, who serves as Chairman of the Boards

» Approves the President’s contract» Has authority to remove

– There are four Boards of Directors for each associate institution

World GDP Proportions

Election of Executive Directors1. Under the Articles of Agreement International Bank for

Reconstruction and Development (IBRD) the five largest shareholders appoint an Executive Director and remaining members elect the other Executive Directors (currently 19 elected, 5 appointed, total 24)

2. Under the Articles of Agreement of IDA and IFC the Executive Directors of the IBRD serve ex officio as Executive Directors of IDA and as members of the Board of Directors of IFC. The MIGA has its own separate Board of Directors consisting of 24 members. All members of MIGA Board are elected in practice the same individuals are chosen to serve on the IBRD Board of Executive Directors and the MIGA Board.

• Regular elections of Executive Directors are held every two years and are normally concluded at time of Annual Meetings

NOTE: The rules for each regular elections are approved in advance of the election by a majority vote of the Board of Governors

Responsibilities & Functions of Executive Directors

Executive Directors are responsible for the general operations of the Bank and exercise all powers delegated to them by the Board of Governors under Articles of Agreement.

1. EDs function in continuous session at the Bank and meet as often as business may require

2. EDs consider and decide IBRD loans and guarantee proposals, IDA credit grants guarantee proposals made by the President, and they decide on the policies that guide the Bank’s general operations

3. Responsible for presenting to the Board of Governors, at the Annual Meetings, an audit of accounts, an administrative budget, and an annual report on Bank’s operations and policies as well as other matters

4. ED’s attend regular Board Meetings twice a week, the EDs also serve on one or more of the five standing committees: Audit Committee, Budget Committee, Committee on Development Effectiveness (CODE), Personal Committee, and Committee on Governance and Executive Directors’ Administrative Matters.

The World Bank Group

• Cooperative of 185 member countries that are shareholders

1. Shareholders are represented by Board of Governors– Ultimate policymakers at the WB– Governors are usually Foreign Ministers or Development Ministers– Meet once a year at Annual Meetings of Board of Governors of the

WB Group and the IMF2. Board of Governors delegate specific duties to the Executive

Directors that are ultimately in charge of the WB operations– Five largest shareholders: France, Germany, Japan, UK and US

appoint an executive director each – The executive directors are elected by the Board of Governors by

80% majority decision» Executive Directors can be appointed and elected only by

International Finance Corporation (IFC) and International Development Association (IDA) members

– Members of Multilateral Investment Guarantee Agency (MIGA) Board of Directors are elected separately

The World Bank Group Composition

• International Bank for Reconstruction and Development (IBRD), December 27, 1945

• Original Goal – reconstruction of nations devastated by WWII• Makes loans to governments and private businesses backed by “sovereign” guarantee

of repayment• Issues World Bank bonds on capital markets ($12 -$15 billion per year, AAA rated)

• International Development Association (IDA), September 24, 1960; 165 member nations

• Complements the IBRD by providing poor-income nations with capital investments and advisory services

• Provides long-term (35-40 years) debt with lower interest rates to the world’s poorest nations

• Due to the abundance of corruption the IDA imposes stricter rules and a watchful eye on all loan contracts

• In contrast to IBRD, IDA is funded largely from contributions from member industrialized nations, additionally, from IBRD income and repayment of IDA credits (credits = loans)

• Since inception IDA’s credits and grants have total $161 billion• IDA loans promote long-term development and sustainment e.g. primary education,

infrastructure, basic health, business climate improvements, and institutional reforms

The Challenge

• To reduce global poverty

• Mission: • Fight poverty• Provide resources• Share knowledge• Build capacity • Forge partnerships in the private sector

• Addressing Global Challenges:– “8 Millennium Development Goals”

Global Challenges

8 Millennium Development Goals

• Established by UN in 2000• Ambitious targets to halve poverty, fight hunger and

disease, and deliver basic services to the poor by 2015• Some of the needs:

• Malaria strikes 500 mill. people worldwide each year - $3 bill/yr

• Electricity needs - $170 bill/yr over next 10 years + $30 bill/yr transition to low carbon energy mix

• Supply water to 1.5 bill. people and provide sanitation to 2 bill. people - $30 bill/yr

• Transportation infrastructure - $130 bill/yr• Primary education for 80 mill. out-of-school children - $7

bill/yr

Six Strategic Themes

1. Overcome poverty and spur sustainable growth in the poorest countries (81 countries)

2. Address special problems of states coming out of conflict or seeking to avoid the breakdown of the state

3. Create a more differentiated business model for middle income countries

4. Foster regional and global public goods 5. Support those seeking to advance development and

opportunities in the Arab World6. The World Bank – special institution of knowledge &

learning

Results

• Tanzania: Credit to private sector increased 250% in 6 years• Poorest countries: 60,000 km of rural roads built,

rehabilitated or maintained in the last 5 years• Kazakhstan: after dike helps raise water, fish return to the

Aral Sea• Senegal: about 1.6 mill. people have gained access to safe

water in urban areas• Bangladesh: stipends help triple girls’ enrollment in

secondary school• China: over 3.8 mill. hectares of forests planted• Vietnam: Electricity for 90% of rural households in 2005, up

from 50% in 1996• Rwanda: HIV testing for 500,000 people and 12 mill.

condoms distributed

Financial Crisis:What the World Bank is doing?

• March 8, 2009 – Poor countries face $270-$700 billion financing gap

• Global Financial Crisis – unemployment crisis• Millions back into poverty and hunger due to

recent food and fuel crisis• Tighter credit conditions and weaker growth cut

government revenues• Threat to shrink emerging markets’ access to

trade and investment• 1% drop in growth traps another 20 mill. in

poverty

Financing

• Developed countries to pledge 0.7% of stimulus package to a “Vulnerability Fund”

• Increase financial support for developing countries

• New commitments of up to $100 bill. over the next 3 years

• $1.2 bill. Global Food Response Program (May 2008)

• New facility to expedite the approval process to help poorest countries

Cont’d

• Ensure Trade Flows• Bolster Distressed Banking Systems• Keep infrastructure projects on track• Shift advisory support services• Support microfinance institutions• MIGA – provides guarantees to foreign banks

to help inject liquidity and bolster confidence in Ukraine’s and Russia’s financial systems

Trade Borders

Advice

• Providing technical analysis and advice

• Crisis preparedness exercises

• Development of the Energy for the Poor initiative – helps the poor adjust to shocks and reduce vulnerability to volatile fuel prices

Partnerships

• Collaboration with IMF and others to help country governments and private sector through lending, equity investments, innovative tools, and safety net programs

• The G7 is not adequate – proposing a new broader steering group to address major economic challenges

• Seek to strengthen multilateral development institutions to support long-term economic growth

World Bank Report 2009

References

• Financial Crisis http://www.worldbank.org/html/extdr/financialcrisis/

• Zoellick, R.B. (2007). Speech: An Inclusive and Substantial Globalization. Retrieved on March 6, 2009 from http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21504730~pagePK:34370~piPK:42770~theSitePK:4607,00.html

• Project Lifecycle and Results http://siteresources.worldbank.org/PROJECTS/Resources/40940-1212588723006/projectcycle_examples.pdf

• ICSID http://www.icsid.worldbank.org/ICSID

• World Development Report 2009 http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTWDRS/EXTWDR2009/0,,menuPK:4231145~pagePK:64167702~piPK:64167676~theSitePK:4231059,00.html